Thursday, July 28, 2011

Shadow Reserve Bank Board

CAMA is running a pilot project where a panel of Australian economists pick the Reserve Bank interest rate that they think is appropriate a few days before each RBA interest rate setting board meeting. It's not meant to be a prediction of what the RBA will do, but an indication of what they should do. Each economist can give a range of interest rates with different probabilities. August's chart is here:



So if this group constituted the RBA board they would leave interest rates unchanged at 4.75%. The most recent inflation report was above the RBA's band for desired inflation but partly driven by shocks from things like banana prices. The non-mining economy really seems to be very weak at the moment as the exchange rate hits a post-float record against the USD above $US1.10. My guess is that they will remain on hold.

2 comments:

  1. Is this just a smaller sample than the futures market?

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  2. The futures market is guessing what the RBA WILL do, while this group is saying what they think they SHOULD do.

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